THE PRESIDENT'S DAILY BRIEF 17 MARCH 1975

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006014747
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: March 17, 1975

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The President's Daily Brief
March 17, 1975
5
Top Jecret 25X1
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Exempt from general
declassification schedule of E.O. 11652
exemption category513(11.(2).13)
declassified only on approval of
the Director of Central Intelligence
ea
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FOR THE PRESIDENT ONLY
March 17, 1975
Table of Contents
Saudi Arabia: Revaluation of the currency will not
have any direct bearing on oil prices. (Page 2)
Notes: Cambodia; USSR; Argentina; Portugal (Pages 2
and 3)
At Annex we present an interagency intelligence
memorandum on The Situation in South Vietnam.
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SAUDI ARABIA
? The Saudis' upward revaluation of
their currency by more than 2 percent on
Saturday will not have any direct bearing
on oil prices, which are quoted mainly in
dollars.
The revaluation and the announcement that the
rate would be adjusted periodically, to reflect
changes in the dollar's rate vis-a-vis the Interna-
tional Monetary Fund's Special Drawing Rights, ap-
parently stem from concern over the domestic infla-
tionary impact of the dollar's decline. By severing
their currency's ties to the dollar and lihking it
to the Special Drawing Rights, which are valued on
the basis of 16 currencies, the Saudis hope to en-
sure that any further decline of the dollar will
have less effect on the cost of goods imported from
Europe. Iran made a similar move last month for the
same reason.
It is possible that other OPEC countries will
soon make similar decisions. Qatar may decide to
link its currency to the Special Drawing Rights
rather than the dollar as part of its own decision
on Saturday to revalue. Coupled with the Saudi and
Iranian decisions, this would put added pressure on
other OPEC states in the area to follow suit.
Although none of these decisions will have any
direct bearing on oil prices, it is possible that
the positions of OPEC members, who want to return
to a system of adjusting the dollar price of oil to
reflect changes in the dollar's value relative to
other major currencies, will be strengthened. This
type of system was used prior to the 1973 oil em-
bargo to help insulate the value of OPEC's oil re-
ceipts from the effects of exchange rate movements.
1
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Cambodia: Lower Mekong
0 udong
Tuol Leap.
Pr T
PHNOM
PENH
15
1
Prey Veng
'
I
*.i")
e--
2
9')(rno
River narrows ,
-;\
, Takeo
Banam )(
Neak Luang
SOUTH VIETNAM
1
0 Miles 10
'5 57 4 73 3-75
? ? t ?
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NOTES
Cambodian army units located northeast of the
recaptured town of TuoZ Leap have.been forced to
withdraw.
Some other units committed to the Tuol Leap
operation, however, are expected to reinforce and
help stabilize these units in the face of this new
threat. At Neak Luong the situation is continuing
to deteriorate. The insurgents reportedly have
entered a portion of the town and have occupied
part of the airstrip. They now control the west
bank of the Mekong River from the South Vietnamese
border to about eight miles from Phnom Penh. Mean-
while, rocket and artillery attacks against Pochen-
tong airport have decreased, and US airlift opera-
tions are continuing on schedule.
Soviet General SecretaryBrezhnev arrived in
Budapest yesterday for the opening of the Hungarian
Communist Party Congress today.
It is Brezhnev's first trip abroad since his
visit to Paris in early December. Most East Euro-
pean states are expected to be represented at the
congress by their top party leaders. Romania and
Yugoslavia, however, will send lesser ranking offi-
cials.
Argentine President Peron's political position
has weakened during the past two months.
There are growing signs of strain within the
Justicialist coalition that brought the Peronists
to power. In addition, a recent survey of army and
navy officers has disclosed widespread dissatisfac-
tion with the failure of Mrs. Peron's government to
improve the country's economic situation and deal
a decisive blow to terrorism. The consensus among
the officers is that Argentina would be better off
with another president, as long as the military had
a hand in the selection. This attitude is a major
shift from the military's view just a few months
ago that there was no alternative to Mrs. Peron.
(continued)
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The leftist-dominated Portuguese government
has extended its control over the nation's financial
sector, following up its nationalization of the
banking system with the takeover of the major insur-
ance companies.
The nationalization of banking and the insur-
ance companies is a major blow to the oligarchy
that has dominated Portugal's economic life and will
give the government a strong hand in directing busi-
ness and industry. The government also announced
over the weekend that it is considering a request
from a Portuguese transport company to give the
Soviet merchant fleet use of refueling facilities
on the island of Madeira. General Spinola, mean-
while, was finally given asylum in Brazil on Satur-
day.
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557488 3-75
Capital Special Zone
South
China
Sea
SOUTH VIETNAM
190
miLts
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THE SITUATION IN SOUTH VIETNAM
At the beginning of the communist
dry season campaign last December, the
intelligence community concluded that
Hanoi was prepared to increase military
action in the South sharply, possibly
including the commitment of part of its
strategic forces in order to change the
political and military balance in the
South. We also concluded that the North
probably would not launch an all-out of-
fensive this spring using al./ or most of
its strategic reserve, except in response
to a major opportunity to achieve a quick
victory. In the recent pattern of events
in Indochina and in the US, particularly
the US debates and actions on the ques-
tion of aid, the North Vietnamese appear
to have sensed just such an opportunity.
Recent developments make it clear that the
North Vietnamese already have increased their mil-
itary activity and that Hanoi's leaders have de-
cided to step up the level of military pressure
even further in the weeks and months immediately
ahead.
--During the past few months recruitment and
training have been sharply accelerated in the
North while large numbers of replacement troops
continue to infiltrate to the South.
--In-country communist units have been shift-
ing into areas which previously have seen
little combat.
--Major elements of two North Vietnamese
strategic reserve divisions have arrived in
the South.
--Communist propaganda has been taking an in-
creasingly strident line regarding "US im-
potence" in Indochina.
Saigon's Response
Faced with Stepped-up communist military action
and the prospect of further escalation, President
Thieu has decided in the past few days to adopt a
new military posture.
(continued)
Al
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Heretofore, Saigon's approach to the war has
been to contest the communists in most areas,
launching preemptive attacks whenever possible and
generally trying to regain lost territory.
Under the new concept, the government is with-
drawing its forces from major portions of northern
and central South Vietnam and now plans to concen-
trate them in the southern half of the country and
around the large population centers along the north-
central coast. The objective is to retain control
over as much of the heavily populated and economi-
cally important areas of the country as possible,
at the cost of virtually writing off the remainder.
The major country-wide communist attacks that
have occurred since early March and the declining
prospects for US military assistance are the prin-
cipal factors contributing to Saigon's decision to
reorder its priorities and change its military
strategy. In recent weeks the South,Vietnamese
have been expending very large quantities of muni-
tions in an attempt to meet the communists head-ono
and President Thieu appears to have decided that
they cannot continue to do so without seriously
jeopardizing the government's ability to cope with
the communists over the longer term.
President Thieu's decision, in short, appears
based on a recognition that--given the government's
deteriorating logistic situation--the costs and
risks of trying to defend all areas of the country
would probably be prohibitive now. In Thieu's
mind, a drastic consolidation of units and supplies
appears to offer the best hope of containing com-
munist attacks this dry season and of buying the
additional time to prepare for another North Viet-
namese campaign 1n 1976.
President Thieu late last week met with the
commanders of Military Regions 1, 2, and 3 to discuss
his strategy and provide guidelines on how he wanted
them to use their forces in support of his program.
In the case of MR 1, the President turned down Lieu-
tenant General Ngo Quang Truong's request to keep
the Airborne Division at Da Nang and ordered him to
proceed with the transfer of the division to Saigon.
One of the division's three brigades will go to Sai-
gon early this week, and the others are scheduled
to move by the end of the month. (They will be re-
placed by a newly formed and incompletely trained
Marine brigade, possibly augmented by rangers, from
MR 3.)
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President Thieu stated that Da Nang must be
held at all costs. but acknowledged that other posi-
tions in the northern provinces- would have to be
given up.
General Truong has already issued orders for
government troopsto withdraw from two district
towns in central Quang Ngai Province. He also plans
to shift some of his remaining forces. Two brigades
of the Marine Division will be transferred from
north of Hue to the Da Nang area to replace the air-
borne troops. A substantially weaker force, includ-
ing the newly activated Marine brigade and ranger
group from MR 3, will be assigned the task of de-
fending the northern approaches to Hue. The 1st
Infantry Division will remaindeployed to the west
and south of Hue.
These redeployments will seriously weaken the
government's position in MR 1, outside Da Nang,
especially in view of recent shifts by North Viet-
namese divisions in the Quang Tri - Thua Thien
area. Large-scale communist attacks in this area
are almost certain, and General Truong believes
Quang Tri Province will be lost. He is also not
optimistic about his chances for holding Hue, and
we share his view.
In MR 2, Thieu's strategy concedes most of
the central highlands to the communists. President
Thieu has told the regional commander, Major Gen-
eral Phan Van Phu, that the recapture of Ban Me
Thuot--the capital of Darlac Province occupied by
the communists last week--was the single most im-
portant military objective in the region.
General Phu has been ordered to concentrate
his military resources on accomplishing this task'
and to move' his forces out of Kontum and Pleiku
for the effort. The evacuation is already in prog-
ress. When it-is completed, Kontum and Pleiku
provinces will, in effect, be abandoned.
Although President Thieu's decision can be
explained in terms of military expedience, it none-
theless risks a psychological unraveling within
the South Vietnamese army that could seriously com-
plicate an orderly consolidation of the government's
military position.
--The permanent relocation of some South Viet-
namese units away from their traditional areas
of operation could impact sharply on the fight-
ing esprit of soldiers in these units.
(continued)
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--The withdrawal from Kontum and Pleiku prov-
inces is already causing serious morale prob-
lems among government troops there?
--We expect this is likely to be the case in
other areas of the country as the scope and
nature of Saigon's plans become known.
--The government still plans to have regional
and territorial forces continue to defend some
remote and expendable areas, but these irreg-
ulars cannot be expected to fight without
close support from main force units.
--President Thieu's military judgment is al-
ready being seriously questioned within the
South Vietnamese military establishment. Gen-
eral Truong, the MR 1 commander, for example,
has termed the decision to transfer the Air-
borne Division to Saigon "irrational."
What Now?
President Thieu's decision to move to a de-
fensive fallback position appears to put earlier
communist military goals for 1975 in easy reach.'
It will also give Hanoi a wider range of opportun-
ities and confront it with new decisions. We be-
lieve that Hanoi will move quickly to exploit Sai-
gon's new vulnerability in the northern provinces.
According to a recently captured prisoner
from the North Vietnamese 324B Division, the com-
munists already had been planning for a major-move
against Hue this dry season. Hanoi now has a far
more realistic and less costly opportunity to take
the city. The communists still have a large re-
serve of five combat infantry divisions northof
the demilitarized zone, and we believe that if
necessary Hanoi will commit some of this force to
achieve the city's capture.
The North Vietnamese will probablychoose to
bypass the strong government defenses around Da
Nang, but they should be able to make significant
gains in southern MR 1, including large parts of
Quang Nam, Quang Tin, and Quang Ngai provinces. In
the central highlands of MR 2, the North Vietnamese
will soon occupy Pleiku and Kontum cities and should
have little difficulty in establishing control over
the inland portions of the whole northern half of
the region.
(continued)
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The South Vietnamese clearly intend to make an
all out effort at Ban Me Thuot. They are now assem-
bling a large combat force to send back into Darlac
Province to retake the town, which North Vietnamese
troops now largely occupy. In the immediate area
there may be the equivalent of two communist infan-
try divisions--possibly including elements of the
North Vietnamese 316th Division from the strategic
reserve.
Government troops have taken up positions on
the eastern edge of Ban Me Thuot, and reinforce-
ments are moving toward the town. The government
will begin its counterattack with the 23rd Division
and two ranger groups, supported by airstrikes,
tanks, and artillery.
We believe that General Phu's estimate that
the town can be retaken in about three weeks is
overly optimistic, particularly in light of in-
creasingly constrained mobility of the South Viet-
namese armed forces. The battle probably will be
costly for both sides and apparently not decisive.
Hanoi may view the developing battle for Ban
Me Thuot as a good opportunity to inflict a crip-
pling blow on the South Vietnamese army--not only
weakening its physical capabilities but, even more,
jarring its morale and self-confidence. To achieve
this objective, Hanoi may be prepared to commit sub-
stantial new forces to the fight.
In any case, further substantial communist in-
roads are likely in Darlac and Phu Bon provinces,
and the government's position in Quang Duc Province
will probably be untenable. In May, the weather
begins to deteriorate and this should slow the
fighting in this area.
The coming fighting in the South Vietnamese
heartland of MRs 3 and 4 will provide the most
critical test for President Thieu's fallback strat-
egy and also shed light on the extent to which Hanoi
is now prepared to push its military campaign. The
communists can be expected to apply intermittent
pressure in the delta and seize some additional ter-
ritory in the outlying reaches of MR 3. Saigon is
already preparing to abandon An Loc, the isolated
and vulnerable capital of Binh Long Province, and
Chon Thanh--its only two enclaves in Binh Long
Province.
(continued)
AS
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the principal communist objec-
tive in MR 3 this year is Tay Ninh Province, an
area which Saigon clearly does not consider expend-
able. Thus far, the communist effort has been di-
rected at isolating Tay Ninh Province from resupply
and reinforcement. The communists, supported by
tanks and heavy artillery, have mounted large scale
attacks on government positions along Routes 1 and
22 in the southern part of the province and have
also kept heavy pressure on South Vietnamese out-
posts on the eastern and western borders of Tay
Ninh.
Saigon has indicated that it will fight hard
to hold on to Tay Ninh City and its surrounding
area, and the communists thus far have refrained
from making a frontal assault. The government ap-
pears to have the advantage in troop strength and
firepower in this area and the arrival of the Air-
borne Division from MR I will add to this edge.
Time is also a factor in this area. In an-
other two months or so deteriorating weather con-
ditions in MR 3 will begin to limit large scale
military operations. If the communists choose to
make an all-out effort to break the back of the
government's strong defensive position in MR 3, they
will have to make a quick decision to bring addi-
tional reinforcements into the area.
As indicated above, President Thieu's new
strategy and the likely consequences of fighting
this spring will give the communists substantial
territorial gains. In addition, there will clearly
be some expansion of the population under communist
control in South Vietnam as a result of this spring's
campaign. The North Vietnamese and Viet Cong now
have meaningful control over about 1 million of
South Vietnam's total population--roughly 22 million.
Even allowing for a substantial flow of refugees to
the government side, the territorial gains which the
communists are likely to make in the next few months
could easily double the number of people under their
control.
Economic Impact
Although Saigon's new posture will have serious
economic consequences, these should be manageable--
at least in the short term. Most of the territory
which will be lost, though potentially important to
economic development, has not provided significant
resources to other areas of South Vietnam for some
time.
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The most immediate problem will be a sharp rise
in the number of refugees, many of whom will have
to be supported from public funds and stocks. The
size of this problem depends on how much territory
the government loses along its moderately populated
"northern coastline. After a good rice harvest, the
goVernment has large food supplies that can be moved
quickly to the deficit areas; and even with urban
income depressed, traditional family sharing and
private charity will provide considerable support.
More important than the direct economic conse-
quences in MRs 1 and 2, however, will be the psycho-
logical impact on businessmen and consumers in gov-
ernment strongholds farther south. The absence of
large-scale commodity or currency speculation in
1972 was an important plus for Saigon. Although the
markets have reflected no significant response to
military reverses so far this year, it is too soon
to predict how they will behave in coming weeks.
Prices for key goods and black market exchange rates,
however, will be important indices of popular con-
fidence in the weeks to come.
The Outlook
The leaders in North Vietnam will view Thieu's
moves as a clear sign of weakness. They may decide
to follow a conservative course and digest the sub-
stantial gains afforded by the South Vietnamese
fallback strategy without running the risks inherent
in a strike for total victory.
Hanoi, however, may decide that very heavy
pressure now--particularly if Cambodia collapses or
if the US Congress curtails or cuts off further aid
to South Vietnam--would deal the army's and the gov-
ernment's confidence and will to resist an irrepar-
ably shattering blow.
Our net judgment of the most likely course of
events over the next several months hinges on psy-
chological imponderables. A mood of defeatism in
South Vietnam--produced by government reverses,
communist gains, dwindling supplies, South Vietnam-
ese perceptions of US behavior, or any combination
of such factors--could become infectious and rap-
idly self-confirming.
We believe that there is a good chance that
South Vietnam, its government, and its army can
avoid this kind of attitudinal collapse unless the
South Vietnamese see a major change in US assistance
policies. Barring such a psychological collapse,
(continued)
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we believe that the, government will survive the com-
munist dry season campaign still in control of most
of the heavily populated and economically important
areas of the country, essentially the southern third
of South Vietnam and portions of the north central
coast, including the major cities of Da Nang, Qui
Nhon, and Nha Trang. This will be at a heavy cost
in supplies and materiel so that the communists will
be in an even stronger position for subsequent fight-
ing than we estimated last December.
At best, the results of this year's campaign
are bound to contribute to popular frustration and
war weariness within government areas and will fuel
public and private criticism of Thieu. For the time
being, we see little prospect of new negotiations
between the government and the communists. The
communist military and political position in the
South will.have been substantially strengthened,
and Hanoi will have more reason than ever to stick
to its demand that Thieu step aside and allow the
formation of a coalition government before the
fighting can stop.
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